CLIN.L Regulatory News (CLIN)

25 February 2020

Execution of strategy sees strong organic growth with

continued double-digit EPS growth

Clinigen Group plc (AIM: CLIN, 'Clinigen' or 'the Group'), the global pharmaceuticals and services group, has today published its half year results for the six months ended 31 December 2019.

FINANCIAL SUMMARY

FINANCIAL HIGHLIGHTS

§ Gross profit up 35% (+9% on an organic basis5) to £108.1m (2018: £80.0m)

§ Adjusted EBITDA up 42% (+10% on an organic basis5) to £62.1m (2018 restated: £43.7m)

§ Adjusted EPS up 34% to 30.8p (2018 restated: 23.0p)

§ Net debt as at 31 December 2019 of £322.3m, (£305.4m excl. IFRS 16 adjustment) representing pro forma leverage of 2.4x with target leverage of 1.0x - 2.0x expected in FY21

OPERATIONAL HIGHLIGHTS

§ First significant step in the revitalisation of Proleukin through supply agreement signed with Iovance Biotherapeutics, which further strengthens the links between the Clinigen operations

§ Commercial Medicines - further validation of Unlicensed-to-Licensed (UL2L) synergy strategy with growth in Melatonin and continued good performance of Glycopyrronium in the UK and from the Eisai portfolio in South Africa. Commercial platform now established across the EU and US with further product in-licensing and acquisition opportunities under review to leverage infrastructure

§ Unlicensed Medicines delivered strong growth in Global Access largely offsetting expected weakness in Managed Access and the UK Specials business. Outlook positive with new exclusive arrangements in place and investment in niche growth parts of UK Specials, such as Aseptic Services, expected to deliver increasing returns

§ Clinical Services - strong growth in CSM offsetting lumpiness in CTS. The integration of CSM and CTS is on track with further, more meaningful steps to be taken now the earnout has ended and with CTS outlook improved post period end with a material contract win

Shaun Chilton, Group Chief Executive Officer, said:

"Our strategy is to build an integrated, international pharma product and services group with strong operational synergies, working with a growing roster of multinational clients and healthcare professionals around the world. We are delivering on our strategy and have seen a strong financial performance - both at the headline numbers and on an underlying organic basis. 

"Key operational highlights include the first supply agreement for Proleukin with Iovance; the performance of Melatonin, our largest Unlicensed-to-Licensed product to add to Glycopyrronium in validating this strategy; and continued strong growth in Global Access.

"With the commercial platform in the EU and US now established, we are actively seeking further product in-licensing and acquisition opportunities to leverage across the business. We are also integrating CSM into our Clinical Services division to drive higher organic growth across the Group through greater cross-selling and seeding relationships into our Unlicensed Medicines business.

"We have continued our good performance into H2 and continue to expect organic gross profit growth at the upper end of our medium-term target range of 5-10%."

Note

1 Group results on an adjusted basis exclude amortisation of acquired intangibles and products, and other non-underlying items relating to acquisitions (see note 3 and 4 of the condensed financial statements).

2 Adjusted net revenue excludes Managed Access pass through revenue which varies each period dependent on the mix of programs.

3 Adjusted EBITDA includes the Group's share of EBITDA from its joint venture and is now shown after the adoption of IFRS 16. The Group implemented IFRS 16 'Leases' for the first time in FY20 using the modified retrospective approach. Statutory reported comparatives have not been restated and therefore the statutory results are not comparable to the prior year. The prior period adjusted results have been restated for IFRS 16.

4 Constant currency growth is derived by applying the prior period's actual exchange rate to this period's result.

5 Year on year comparisons referred to as 'organic' are a measure of growth on a constant currency basis, excluding the impact of business and product acquisitions. Acquisitions completed in the previous financial year are included on a like for like basis including the results for the acquisition where it is included in the comparable historical period. Organic growth is presented to aid the reader's understanding of the underlying performance of the business. In previous reports, organic growth was calculated on a pro forma basis with the comparative period results before acquisition based on the vendors' previously reported results. The like for like basis now used has been necessary due to the limited reported financial information available for the products' results prior to acquisition by Clinigen. On a pro forma basis, the best estimate for organic gross profit growth for the six months ended 31 December 2019 is 10%.

6 Operating cash flow is net cash flow from operating activities before income taxes and interest.

- Ends -

An analyst briefing will be held at 9:30am on Tuesday, 25 February 2020 at the offices of Instinctif Partners,65 Gresham Street, London EC2V 7NQ.

An audio replay file will be made available shortly afterwards via the Group's website: www.clinigengroup.com.

Contact details

Notes to editors

About Clinigen Group

Clinigen Group plc (AIM: CLIN) is a global pharmaceutical and services company with a unique combination of businesses focused on providing ethical access to medicines. Its mission is to deliver the right medicine to the right patient at the right time through three areas of global medicine supply; clinical trial, unlicensed and licensed medicines. The Group has sites in North America, Europe, Africa and the Asia Pacific region.

Clinigen now has over 1,100 employees across five continents in 14 countries, with supply and distribution hubs and operational centres of excellence in key long-term growth regions. The Group works with 22 of the top 25 pharmaceutical companies; interacting with over 15,000 registered users across over 100 countries, shipping approximately 6.4 million units in the year.

For more information on Clinigen, please visit www.clinigengroup.com

Cautionary statement

This announcement contains certain projections and other forward-looking statements with respect to the financial condition, results of operations, businesses and prospects of Clinigen Group plc. These statements are based on current expectations and involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. Any of the assumptions underlying these forward-looking statements could prove inaccurate or incorrect and therefore any results contemplated in the forward-looking statements may not actually be achieved. Recipients are cautioned not to place undue reliance on any forward-looking statements contained herein. Except as required by law, Clinigen undertakes no obligation to update or revise (publicly or otherwise) any forward-looking statement, whether as a result of new information, future events or other circumstances. 

OVERVIEW

Clinigen is dedicated to providing healthcare professionals (HCPs) and their patients with greater access to medicines around the world, and in the process increasing the value of a pharmaceutical product by extending and expanding its lifecycle.

Clinigen achieves this through operating as a pharmaceutical and pharma services group with a unique combination of businesses; Clinical Services, Unlicensed Medicines and Commercial Medicines - each focused on enabling ethical access to critically important hospital medicines - with each business working synergistically to facilitate access to medicines at key points of a product's lifecycle. The Group's mission is 'Right Medicine, Right Patient, Right Time'.

Within services, Clinigen's aim has been to create an international, integrated services group via organic growth and through a buy and build strategy, positioning itself as the most logical partner for two distinct but directly connected customer groups:

1) Pharmaceutical and biotech companies, enabling them to realise the long-term commercial value of their product(s) by helping them manage the product lifecycle most effectively; and

2) Healthcare professionals, particularly hospital pharmacists, giving them a 'go to' source for hard to access medicines.

Within pharmaceutical products, the Group is building a portfolio of specialist, hospital medicines to further increase shareholder value by revitalising these products through maximising the insight of its unlicensed supply channel to drive extended use of these niche, important medicines.

Following the strategically transformational corporate and product acquisitions made in FY19, the focus for the Group has been to integrate the acquisitions further and to capitalise on the Group's international platform to support synergistic growth. Integration of these acquisitions is either complete or well underway, and the Group is already seeing the benefits through strong financial performance and operational synergies.

An important area of focus continues to be in strengthening the links between the Group's three business operations by deepening the relationships with both pharmaceutical and biotech companies (clients) and HCPs (customers). From the Group's client base of 563 pharmaceutical and biotech companies, it worked with 40 across two or more business operations. Clinigen has also expanded the number of registered users (HCPs) with which it interacts to 16,977 (2018: 13,769) on its digital platform, Cliniport.

The Group is delivering on its strategy, as demonstrated by the good financial performance in H1. Net revenue increased by 24% (24% on a constant currency basis and 6% on an organic basis), gross profit increased by 35% (35% on a constant currency basis and 9% on an organic basis) to £108.1m (2018: £80.0m), driven by both the acquisitions made in FY19 and a strong underlying performance.

Adjusted EBITDA increased by 42% (42% on a constant currency basis and 10% on an organic basis) to £62.1m (2018 restated: £43.7m). Adjusted EPS increased by 34% to 30.8p (2018: 23.0p). Operating cash flow at £10.1m (2018 restated: £34.6m) was impacted by an outflow in working capital in the final months of the period.

The Board has also increased the interim dividend by 10% to 2.15p.

As a result of the deferred consideration paid for Proleukin, the increase in working capital, and the IFRS 16 adjustment, net debt increased during the period by £69.9m to £322.3m. Net debt is expected to increase by the end of the current financial year as operational cash flow is offset by deferred consideration payments for CSM and Proleukin alongside capital expenditure.

CURRENT TRADING AND OUTLOOK

Trading to date in the second half of the current financial year has been in line with the Board's expectations. The Group remains in a good position to drive further growth across all parts of the business in the year ahead. The Board believes the Group is well placed to capitalise on the substantial opportunity in its markets.

The Group's future organic gross profit is targeted to grow by at least 5% to 10%, with FY20 set to be at the upper end of this guidance. Organic EBITDA growth is expected to marginally exceed organic gross profit growth in FY20 with operational leverage expected to increase further beyond FY20. 

OPERATIONAL REVIEW

Commercial Medicines (encompassing medicines acquired, licensed and developed)

The strategy for Commercial Medicines is comprised of three areas of focus in order to build a diversified product portfolio that can deliver sustainable growth through:

o Acquired: Continued revitalisation/growth of current portfolio of niche hospital-only and critical care products, coupled with future, selective product acquisitions

o Licensed: Being the licensing partner of choice for pharmaceutical and biotech clients in their non-core territories through regional licensing agreements

o Developed: Developing a long-term pipeline of medicines to convert from unlicensed into a licensed medicine through the Group's Unlicensed-to-Licensed (UL2L) model

Commercial Medicines represents 52% of Group gross profit. Gross profit increased 72% to £56.3m (2018: £32.8m) due to a good underlying performance from the oncology portfolio in the Acquired Products and from both the Licensed and Developed Product portfolios.

Growth was supported by the acquisitions made in FY19. Gross profit on an organic basis increased 30%. Gross margin was 74.5% (2018: 71.3%) with the increase due to the change in mix towards the higher margin Acquired Product portfolio.

Acquired Products (by therapeutic category)

Collectively the seven Acquired Products, along with iQone, the Swiss-based specialty pharmaceutical business acquired in October 2018, contributed 64% of Commercial Medicines' gross profit (2018: 62%). The increase in the relative percentage is due primarily to the acquisition of the US rights to Proleukin.

Anti-infective portfolio (Foscavir and Imukin)

Foscavir, the Group's largest product prior to the acquisition of Proleukin, is an anti-viral used to treat cytomegalovirus (CMV) viraemia and infection primarily in bone marrow transplant patients. The competitive pressures on Foscavir seen in FY19 have continued, particularly in Europe. However as previously guided, stabilisation of Foscavir has already begun in the US and Japan, and is expected to lead to an improved performance in the second half.

Imukin has performed in line with management expectations with further steps in revitalisation expected in the second half.

Oncology portfolio (Proleukin, Cardioxane, Savene, Totect and Ethyol)

The Group acquired the rest of world rights to Proleukin in July 2018, and then subsequently acquired the US rights in April 2019. Proleukin, one of the Group's two biologics, is indicated for use in metastatic renal cell carcinoma, as well as for metastatic melanoma in certain markets. It is Clinigen's largest product and has created the foundation from which to expand Clinigen's existing footprint in the higher value US market.

Demonstrating the potential to become an integral part of future cancer combination therapies, Proleukin is currently being used in over 120 active studies across multiple therapeutic areas and indications. This creates an opportunity to increase sales into clinical trials but also provides a mid-term opportunity by increasing the Interleukin-2 (IL-2) market if any of these trials are successful.

As announced in January 2020, an agreement was signed with Iovance Biotherapeutics (Iovance), a leading biotechnology company developing novel T-cell-based cancer immunotherapies. Clinigen has agreed to supply Proleukin to Iovance for use in the clinical development of its novel Tumor Infiltrating Lymphocytes (TIL) therapy. The bulk supplies will be made over a two-year period which began in December 2019. The agreement with Iovance is a significant step in the revitalisation of Proleukin and demonstrates the Group's global commitment to fully understanding the role it can play as an immunotherapy treatment for cancer.

The Group has also made progress towards normalising pricing differentials that exist between different markets in the supply of Proleukin into clinical trials. Within its current on-label indications, Proleukin usage declined. However, the rate lessened meaningfully through increased, focused, promotional support, and management has seen a stabilisation in performance.

As announced in May 2019, the Group took back direct control of Ethyol and Totect in the US from Cumberland during the half. Ethyol particularly benefitted from this transition, however performance is expected to moderate in the second half.

The dexrazoxane products (Cardioxane, Savene and Totect) collectively performed well. Savene benefitted from the education of HCPs in the usage of Savene in the hospital setting and from the expertise of Clinigen's supply and distribution partners to expand its geographical reach and commercial presence in Europe. Such out-licensing agreements are a key part of the strategy for Savene to accelerate its sales growth.

Licensed Products

The Group continues to make good progress in extending the commercial strategy through utilising its international platform and expertise in being the ideal licensing partner for an increasing number of companies where they have no desire nor infrastructure to commercialise their products.

In the Africa and Asia Pacific region, the Group has 251 (2018: 215) specialist pharmaceutical and medical-technology licensed products. The increase is a result of the marketing authorisations (product registration certificates) transferring to Clinigen from the partnership agreement with Bristol-Myers Squibb in South Africa as well as an increase in the number of licenses held in Australia and New Zealand.

In September 2019, Clinigen signed an exclusive distribution agreement with Cheplapharm to distribute chemotherapy products Etopophos® and Vepesid® in Australia and New Zealand. This agreement follows the licensing agreement for Hunterase signed with GC Pharma in Japan in April 2019, and is in line with the Group's in-licensing strategy in Commercial Medicines to focus on value-added oncology products and to partner with pharmaceutical companies to distribute and provide access to their products utilising Clinigen's global infrastructure.

Management is actively reviewing new in-licensing opportunities of both established and late-stage development molecules to launch from the now established infrastructure. These late-stage development molecules have been introduced from the Group's Managed Access business and represent a further strengthening of the platform, as management work to 'follow the molecule' from development to launch, partnering with those companies that do not have the required commercial infrastructure, or wish to benefit from accessing both the unlicensed and licensed market opportunities in full.

Developed Products

The Commercial Medicines business also develops, licenses and commercialises medicines that were previously prescribed as unlicensed medicines in the UK. Obtaining marketing authorisations for previously unlicensed products is an example of the UL2L strategy in Commercial Medicines. This strategy not only leads to a material uplift in revenues but also satisfies a previously unmet clinical need for patients and is why the business will continue to explore and invest to strengthen and diversify the portfolio on an international basis.

By period end, the business had 15 products in its portfolio. Glycopyrronium Bromide Oral Solution 1mg/5ml (Glyco), the portfolio's first significant product to be taken through the UL2L regulatory pathway continues to perform strongly and the outlook remains positive. In addition, following its launch in June 2019, the portfolio's lead product, Melatonin, performed well and the Group anticipates launching more variants of the product during the financial year.

The performance of both these products were a key driver of organic growth in the period. Although both products initially were supplied on an unlicensed basis and subsequently launched in the UK, steps are now being undertaken to internationalise revenues by utilising the Group's commercial infrastructure and working with partners to supply and distribute into new territories. Internationalisation of the Developed Product portfolio is a key part of the strategy in extending and expanding the lifecycle of medicines.

Commercial Medicines pipeline

The Group continues to seek selective product acquisitions that fit within the Acquired Product portfolio, and regional and global in-licensing opportunities to leverage the platform. In addition, the business continues to develop its pipeline of UL2L products, as well as complementary, larger, niche generic products. There are currently 15 products in the Developed Product pipeline which are due to be launched in the next two to three years (2018: 18).

Unlicensed Medicines (encompassing Managed Access and Global Access)

Clinigen is the international leader in ethically sourcing, managing and supplying unlicensed medicines to hospital pharmacists and physicians for patients with a high unmet medical need. The Group contracts with pharmaceutical and biotech companies to provide Managed Access Programs (MAPs) for innovative new medicines and provides Global Access to medicines which remain unlicensed at the point of care.

Clinigen's aim is to be the first point of call for HCPs to source hard to access, unlicensed medicines through its strategy of:

o Developing a rich pipeline based on industry trends and innovation

o Providing a world class customer service to HCPs, sourcing hard to access medicines for their patients

o Converting MAPs to long-term exclusive supply agreements in Global Access

The Unlicensed Medicines operation represents 31% of Group gross profit. Gross profit on a reported and organic basis decreased by 5% to £33.8m (2018: £35.7m), which represented a strong performance in Global Access offset by weaker performances in Managed Access and the UK Specials business.

Managed Access

The performance in Managed Access was affected by its two largest programs beginning to wind down, the impact of which is expected to lessen meaningfully in the second half. This diminishing impact along with new program wins and an increased pipeline, is expected to contribute towards an improved year on year performance in the second half.

As at 31 December 2019, there were 118 MAPs (December 2018: 119 / June 2019: 117), of which 95% of products shipped on behalf of the client were provided free of charge to patients. When the product is 'charged for', the revenue is passed through the Group's accounts. A shift in mix towards 'free of charge' products can have a material impact on the revenue generated without affecting gross profit, which is why the Group views net revenue and gross profit as the best measures of top-line growth.

Following the 13 programs that began in the second half of the last financial year, there were a further16 programs signed in the first half of this financial year and the business has continued to add new program wins post period end. These are expected to contribute towards an improved year on year performance in the second half.

Collectively, the top 10 MAPs contributed 34% of the Managed Access gross profit (2018: 41%) with eight of the top 10 in the oncology therapy area (2018: eight oncology).

An increasing area of focus for the Managed Access business and a potential future revenue stream is to utilise the EU capability of iQone. Not only is iQone helping support growth of Clinigen's Commercial Medicines portfolio, it is also a key differentiator from its competitors in Managed Access by providing EU medical scientific liaison (MSL) capability. Specifically, iQone's capability enhances the Group's proposition as a commercial partner for pharmaceutical and biotech companies and Clinigen is now working on securing long-term in-licensing agreements.

Global Access

In Global Access, the Group ethically supplies unlicensed or short supply medicines to patients via their HCPs; note, the hospital pharmacist is the main customer. There are 42 exclusive supply agreements for high demand or niche medicines covering 57 products under management (2018: 56).

On a regional basis, Asia delivered excellent growth, driven by expanding supply from the hub in Singapore into surrounding territories. Strong growth in Australia, New Zealand and Europe was supplemented by maximising the opportunity in fulfilling drug shortages. Although short term in nature, shortages are becoming an increasing challenge for pharmaceutical companies as they struggle to manage an imbalance in the demand and supply of medicines. In having the international infrastructure to provide access to medicines, this is an increasing area of growth for the division as well as serving a benefit to patients in need.

As previously highlighted, the niche UK Specials business within Unlicensed Medicines is facing modest pricing pressure from products going onto drug tariffs and volume pressure from increased competition. In addition, as a result of launching Melatonin in June 2019, the revenue associated with the product is now recognised in Commercial Medicines where it has been a key contributor of growth.

More positively, within the UK Specials business there are areas which are delivering good growth. Aseptic Services prepare and supply patient-specific, dose-banded and batch-made aseptically prepared products and are benefitting from fulfilling a capacity constraint in the market. Management is investing in its Aseptic capability and expect this to help the business return to EBITDA growth in the next financial year.

A major contributor to the future success of the Unlicensed Medicines business is through a digital platform, driving customer intimacy and extending and expanding Clinigen's reach. The Group is working towards a unified platform following the implementation of ClinigenOne, the Group's Enterprise Resource Planning (ERP) system. In the meantime, The Group has a digital service oriented to Global Access, Clinigen Direct, and a complementary service, Cliniport, oriented to Managed Access.

Clinigen Direct was launched in June 2019. This is the Group's digital search tool for HCPs to source hard to access medicines with over 2,500 medicines available. It also provides customer service support to help HCPs navigate the regulatory hurdle in importing unlicensed medicines. Since its launch, Clinigen Direct has received interest from HCPs in over 150 countries.

This service is complementary to Cliniport, the Group's customisable, scalable web portal which continues to be an invaluable part of Clinigen's offering for its Managed Access clients and strengthens its interaction with the customer. The community of HCPs on Cliniport continues to build and now has 16,977 registered users (2018: 13,769).

Unlicensed Medicines pipeline

The business development teams in Unlicensed Medicines are focused on forming long-term relationships with their clients to realise the full opportunity of following a molecule from an early access setting through to commercial launch. Given the lengthy nature of the product lifecycle, this opportunity is likely to be realised in the medium to long-term.

At the end of period there were 51 programs in the Managed Access pipeline (2018: 47) and33 partnered products in the Global Access pipeline which the business is looking to partner with on an exclusive basis (2018: 22).

Clinical Services (encompassing CTS and CSM)

Clinical Services aims to be the market leader in servicing clinical trials and supplying quality-assured comparator medicines internationally. Its strategic focus is on:

o Establishing Clinigen with customer compounds earlier in the product lifecycle (phase I/II)

o Improving visibility and quality of revenue streams through diversification of customer base, longer term contracts and exclusive supply arrangements

o Presenting product opportunities to the Unlicensed Medicines business operation

Clinical Services represents 17% of Group gross profit. Gross profit increased 57% to £18.0m (2018: £11.5m), due to a full period's contribution from CSM. Gross profit on an organic basis decreased by 4%.

The acquisition of CSM in October 2018 gave the Group a broader complementary offering to the comparator sourcing market within Clinical Services. It provided a diversified set of value-added clinical services: comparator and ancillary sourcing, on demand specialist packaging, labelling, supply and distribution, and biological sample management, along with infrastructure in the US, Belgium and Germany. CSM performed well in H1, with both gross profit and EBITDA growth exceeding 15% on an organic basis.

The business continues to build capacity in its platform in Europe and the US for future growth. Work continues to harness the client synergies to bring together the package and labelling and legacy Clinigen comparator business to develop deeper client relationships at the start of the product lifecycle. The number of clients in Clinical Services continues to be strong and diverse with 458 clients generating revenue in the 12 months ended 31 December 2019, 370 from CSM alone. There were 13 clients which worked across both the CTS and CSM businesses, 26 of which worked with Unlicensed Medicines and 10 of which worked with Commercial Medicines, demonstrating both the synergy that currently exists and the potential cross selling opportunity.

The earn-out period associated with CSM was completed on 31 December 2019 and more meaningful steps are now being taken to integrate it into the Clinical Services business. Business Development and strategic sourcing were previously working under one leadership and management structure which has already led to revenue synergies with CTS, with the expectation that this will now increase. Since CSM's acquisition, 14 introductions have been made to Unlicensed Medicines and 11 introductions have been made from Unlicensed Medicines to Clinical Services, reinforcing the links between the Group's business operations.

Following a strong H2 last financial year, the turnaround in CTS is continuing. Whilst the performance to December was slightly behind management's expectations, this largely reflects a slower than expected period from key customers. The focus remains on improving service levels amongst the existing client base and becoming more competitive with sourcing in a highly competitive market. Business Development is focused on leveraging the existing client base and rejuvenating older relationships as well as developing revenue synergies with CSM.

Clinical Services pipeline

Clinical Services continues to be a trusted partner capable of delivering high quality services across the world with an extensive understanding of the complex regulatory environment. These strengths, combined with overlaying the services offered by CSM, position the operation well to take advantage of the rapidly developing market opportunity.

The Clinical Services pipeline is broadly in line with the prior year. Post period-end a significant contract was won in CTS with a large pharmaceutical company that supports both the near and medium-term outlook. This significant contract win alongside the existing pipeline of opportunities should help deliver a significantly improved second half performance.

Group infrastructure

The Group's ERP system was implemented in October 2019. The ERP is designed to deliver automated, streamlined operational activities and processes to increase the Group's efficiency and productivity.

Upon implementation, several process issues were identified, from order creation to shipping and billing, and whilst most were resolved within weeks, some remained until the period-end, which is not unusual in a project of this scope and scale. This included delays in invoicing and subsequent cash collection which contributed to a working capital outflow that is expected to reverse in the second half. These key concerns have been addressed with help from a specialist ERP implementation firm and the Group is now working to maximise the benefits of the ERP with the next stages of implementation to make the business ready for full digitalisation.

The ERP is by far the Group's most extensive capital expenditure project and it is a critical feature for leveraging the operational benefit of the enlarged Group for the future. The operational efficiency obtained from its implementation will allow the Group to better compete on a global scale.

Shaun Chilton

Group Chief Executive Officer 

FINANCIAL REVIEW

Clinigen has achieved a strong period of organic growth, in line with guidance, with the Group well positioned to repeat this in the second half. On top of the strong organic growth we have seen operational leverage and the benefits of prior year acquisitions help deliver earnings per share (adjusted EPS) growth of 34%.

Overall EBITDA has increased, in-spite of continued investment in the platform, with further top-line growth expected to drive greater returns over the medium term. Cash generation and cash conversion in the period were below historic levels, albeit management sees this as primarily timing related and expect this working capital headwind to reverse in time with the fundamental positive cash generation characteristic of the Group unchanged.

With the large contract win in CTS confirmed, the momentum in Unlicensed Medicines now building and the key headwind in Commercial Medicines normalised, the Group expects to see continued strong organic growth in H2. On top of this, the Group is exploring new in-licensing and acquisition opportunities to leverage across the platform, that will both underpin the business strategy of focusing on both unlicensed and licensed markets and demonstrate the synergistic link between the businesses.

Summary adjusted income statement

1 The summary adjusted income statement presents Group results on an adjusted basis excluding amortisation of acquired intangibles and products, and other non-underlying items relating to acquisitions (see note 3 and 4 of the condensed financial statements).

2 Adjusted net revenue excludes Managed Access pass through revenue which varies each period dependent on the mix of programs.

3 The Group implemented IFRS 16 'Leases' for the first time in FY20 using the modified retrospective approach. Statutory reported comparatives have not been restated and therefore the statutory results are not comparable to the prior year. The prior period adjusted results have been restated for IFRS 16.

4 Constant currency growth is derived by applying the prior period's actual exchange rate to this period's result.

5 Year on year comparisons referred to as 'organic' are a measure of growth on a constant currency basis, excluding the impact of business and product acquisitions. Acquisitions completed in the previous financial year are included on a like for like basis including the results for the acquisition where it is included in the comparable historical period. Organic growth is presented to aid the reader's understanding of the underlying performance of the business. In previous reports, organic growth was calculated on a pro forma basis with the comparative period results before acquisition based on the vendors' previously reported results. The like for like basis now used has been necessary due to the limited reported financial information available for the products' results prior to acquisition by Clinigen. On a pro forma basis, the best estimate for organic gross profit growth for the six months ended 31 December 2019 is 10%.

A number of adjusted measures are used by the Board in reporting, planning and decision making. Adjusted results reflect the Group's trading performance and exclude amortisation of acquired intangibles and products, and non-underlying costs relating to acquisitions which are explained in note 4 of the condensed financial statements.

Overall, the Group delivered strong growth in revenues which increased by 17% (17% on a constant currency basis) to £243.7m (2018: £208.9m). Net revenues, adjusting for the pass through revenue in the Managed Access business in Unlicensed Medicines, grew by 24% (24% on a constant currency basis).

Group profits also grew strongly, with gross profit up 35% on a constant currency basis, adjusted EBITDA up 42% on a constant currency basis and adjusted EPS up 34%.

Profitability

The growth in gross profit was driven by both the acquisitions made in FY19 and a strong underlying performance. On an organic basis, there were good performances in Commercial Medicines, from CSM in Clinical Services and in Unlicensed Medicines, from Global Access. These performances offset weaker performances from CTS in Clinical Services and in Unlicensed Medicines, from both Managed Access and the UK Specials business.

Adjusted EBITDA increased by 42% (42% on a constant currency basis) to £62.1m (2018 restated: £43.7m). The growth was higher than the growth in gross profit due to operational leverage and the change in business mix following the acquisitions. Adjusted EBITDA on an organic basis increased by 10% benefiting from controlled investment in underlying overheads and a reallocation of spend towards higher growth opportunities, reflecting the continued focus on driving efficiencies across the Group.

Management continues to see further cost saving opportunities from the enlarged platform, from better sourcing of product for its CTS and Global Access businesses, from moving to single source opportunities on key spend lines and on challenging non-drug procurement costs. These cost saving opportunities are set to help fund growth across other areas of the business through targeted reinvestment.

See note 3 of the condensed financial statements for a reconciliation of adjusted EBITDA to the IFRS equivalent comparative.

Finance cost

The adjusted net finance cost was £6.0m (2018 restated: £4.0m) with the increase due to the Group's higher net debt position following the recent acquisitions. The average interest charge on gross debt, which increases as leverage increases, was 2.8% (2018: 2.9%). The reported net finance cost was £11.2m (2018 restated: £5.0m), after taking account of the non-cash £5.1m unwind of discount on the deferred and contingent consideration relating to the acquisitions (2018: £1.0m).

Reconciliation of adjusted profit before tax to reported profit before tax

The table below shows the reconciling items between the adjusted profit before tax of £51.8m (2018: £36.7m) and the reported profit before tax of £24.8m (2018: £12.9m).

The adjustments to profit before tax comprise costs relating to amortisation, acquisitions and the Group's share of the tax charge on the joint venture earnings of £0.1m (2018: £0.2m).

Total amortisation was £23.9m (2018: £16.6m), of which £15.2m (2018: £13.7m) related to acquired intangibles, £7.4m (2018: £2.5m) related to acquired product licences and £1.1m (2018: £0.4m) related to software.

Acquisition costs amounted to £0.3m (2018: £5.0m) relating to the CSM and Proleukin acquisitions. Restructuring costs were £1.4m (2018: £1.1m), in respect of redundancies as well as preparations for any potential Brexit impact.

There was a £2.5m foreign exchange credit (2018: £0.3m charge) realised from revaluation of the contingent consideration on CSM and iQone which is denominated in foreign currency.

Taxation

Taxation was £6.0m (2018: £3.0m), based primarily on the prevailing UK and overseas tax rates. This charge is calculated as £10.9m based on the adjusted profit of £51.8m, offset by a credit of £4.9m in respect of the adjusted items.

The Group's adjusted effective tax rate (ETR) increased to 21.0% (2018: 20.6%) due to a higher proportion of earnings in Europe and the US. Given the increasing proportion of activity from the US, the Group expects the ETR to be broadly 21% for FY20.

Earnings per share

Adjusted basic EPS, calculated excluding amortisation of acquired intangibles and products, and other non-underlying items, increased by 34% to 30.8p (2018: 23.0p). The increase reflects the Group's higher adjusted profit from operations, offset by dilution and higher finance costs following the acquisitions in FY19 and the related placing and debt financing.

Reported basic EPS was 14.1p (2018: 7.7p). The increase is broadly in line with the increase in adjusted basic EPS.

Dividend

The Board is committed to a sustainable and progressive dividend policy and expects interim and final dividend payments to be split approximately one-third to two-thirds respectively.

The Board has increased the interim dividend by 10% to 2.15p per share (2018: 1.95p).

The interim dividend will be paid on 17 April 2020 to shareholders on the register on 20 March 2020.

Cash flow and net debt

Operating cash flow of £10.1m (2018 restated: £34.6m) reflects an increase in working capital in the final months of the period, (excluding the effect of acquisitions, non-underlying items, and exchange adjustments). The primary reason was the purchase and supply of Proleukin in the US. Working capital was also impacted by the timing of payments from across the Group, particularly in the Africa and Asia Pacific region, and due to delays in invoicing and subsequent cash collection caused by the launch of the Group's ERP system. Management expects these temporary movements to reverse in H2 with the working capital investment in Proleukin expected to remain at high levels given the timing of shipments to customers towards the financial year end.

Capital expenditure (excluding product acquisitions) was £9.4m (2018: £9.5m), which includes £3.4m related to warehouse, IT and other infrastructure investments, £3.6m related to the Group ERP system, and £2.4m on new product development. Capital expenditure for H2 of FY20 is expected to be below the first half.

The Group made the first of two $30m deferred consideration payments for the rights to Proleukin US during the period, with the second payment due in the second half of the current financial year.

For CSM, the Group paid initial consideration of £115.5m (US$151.9m) in cash on completion in October 2018 with additional contingent consideration which had a fair value at 30 June 2019 of £55.0m (US$69.8m). The contingent consideration is payable in the second half of the current financial year based on the adjusted EBITDA generated by CSM in the 12 months to 31 December 2019.

The other main cash outflows were tax paid of £15.3m (2018: £6.1m), interest paid of £5.3m (2018: £3.4m) and dividends paid of £6.3m (2018: £5.1m).

As a result of the deferred consideration paid for Proleukin, the increase in working capital and the IFRS 16 adjustment, net debt increased by £69.9m to £322.3m. Net debt is expected to increase by the end of the current financial year as operational cash flow is offset by deferred consideration payments for CSM and Proleukin alongside capital expenditure. Pro forma leverage is expected to marginally increase in the current financial year, from 2.4x at the end of the period, before reducing thereafter with management targeting leverage of 1.0x - 2.0x in FY21.

Treasury management

The Group's operations are financed by retained earnings and bank borrowings, and on occasion, the issue of shares to finance acquisitions. 

Post period end, the debt facility has been increased from £375m to £430m, comprising an unsecured £180m term loan with a single repayment in 2023 and an unsecured revolving credit facility of up to £250m. The incremental debt facilities are to help cover the upcoming deferred consideration payments on CSM and rights to Proleukin US, whilst providing headroom for future acquisitions should they arise.

At the period end, there were two covenants that applied to the bank facility which remain unaltered following the facility increase: interest cover of not less than 4.0x and net debt/adjusted EBITDA cover of not more than 3.0x. As at 31 December 2019, interest cover was 12.0x and the net debt/adjusted EBITDA leverage was 2.4x. The leverage ratio in the current financial year is expected to marginally increase given the investment in working capital for the supply of Proleukin in the US before reducing thereafter.

Borrowings are denominated in a mixture of sterling, euros and US dollars, and are managed by the Group's UK-based treasury function, which manages the Group's treasury risk in accordance with policies set by the Board. 

Clinigen reduces its exposure to currency fluctuations on translation by typically managing currencies at Group level using bank accounts denominated in foreign currencies. Where there is sufficient visibility of currency requirements, forward contracts are used to hedge exposure to foreign currency fluctuations.

The Group's treasury function does not engage in speculative transactions and does not operate as a profit centre. The Group has applied hedge accounting where permissible to match hedges to the transactions to which they relate thereby reducing volatility in the results which may arise from gains and losses on hedging instruments.

Mid-term guidance and proposed future change to reporting structure

The fundamentals of the business remain strong and the Group is well positioned to capture further share from its service focused end-markets whilst revitalising and growing its product portfolio in the Commercial Medicines business.

Future organic gross profit is targeted to grow by at least 5% to 10%. With the overall outlook for the markets in which the Group operates remining positive, FY20 is expected to be at the upper end of this range.

In the short term, this view is being driven by Commercial Medicines, CSM in Clinical Services and in Unlicensed Medicines from Global Access. Over the medium-term, growth is expected to come more broadly from each division as known headwinds in the Group from Foscavir and the UK Specials business lessen and as the Group's end-market dynamics remain positive. Management then sees the potential for higher organic growth yet again as Proleukin revitalisation takes place.

Management intends to invest in the platform, particularly in its US and EU infrastructure, digital capabilities, the ERP platform and product development to help drive longer-term organic growth. As such, organic EBITDA growth is expected to marginally exceed organic gross profit growth in FY20 with operational leverage expected to increase further beyond FY20.

As announced at the full year results, the Group reiterates its commitment to change its reporting structure to a divisional EBITDA profit-level model, akin to industry peers, with the first reporting date set to be by the end of FY20. Management believes this will lead to better internal cost control and P&L accountability whilst allowing for easier interpretation of results by external stakeholders.

Currency sensitivity

The Group's activities expose it to currency risk primarily in relation to the US Dollar and Euro. The Group uses forward contracts to reduce the impact of this risk and therefore expect it will be broadly neutral for the current financial year. If the current exchange rates are assumed to apply throughout FY21, the Group estimates it would have a 2% - 3% negative impact on adjusted EBITDA. Current spot exchange rates to pound sterling as of 24 February 2020 are USD: 1.29; EUR: 1.19; ZAR: 19.51; AUD: 1.94.

Capital allocation

The Group's capital allocation framework exists in order to prioritise the use of cash and maximise shareholder value whilst retaining the flexibility to make value enhancing acquisitions. The four principles within the framework are as follows:

·; Reinvest for organic growth

·; Maintain a progressive dividend policy

·; Aim to paydown and maintain net debt within a range of 1.0x to 2.0x EBITDA on an ordinary basis

·; Make acquisitions in line with the Group's strategy with a disciplined approach to valuation

Principal risks facing the business

Clinigen operates an embedded risk management framework, which is monitored and reviewed by the Board. There are a number of potential risks and uncertainties that could have a material impact on the Group's financial performance and position. These include risks relating to the political environment, competitive threat, counterfeit products penetrating the supply chain, compliance, reliance on technology, cyber risk, foreign exchange, people and the identification, strategic rationale and integration of acquisitions. These risks and the Group's mitigating actions are set out on pages 46 to 49 of the Annual Report 2019.

Nick Keher

Group Chief Financial Officer

Condensed consolidated income statement

Condensed consolidated statement of comprehensive income

All amounts relate to continuing operations.

Condensed consolidated statement of financial position

The notes on pages 22 to 28 form an integral part of these condensed consolidated financial statements. 

Condensed consolidated statement of cash flows

Condensed consolidated statement of changes in equity

Notes forming part of the condensed consolidated financial statements

1. General information

Clinigen Group plc ('the Company') and its subsidiaries (together, 'the Group') is a specialty global pharmaceutical and services group headquartered in the UK, with offices in the US, South Africa, Australia, New Zealand, Japan, Hong Kong, Singapore, Greece, Belgium, Switzerland, France and Germany.

The company is a public limited company, which is listed on the AIM market of the London Stock Exchange and incorporated and domiciled in the UK. The address of its registered office is Pitcairn House, Crown Square, First Avenue, Burton-on-Trent, DE14 2WW, United Kingdom.

These condensed interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 June 2019 were approved by the board of directors on 18 September 2019 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. These condensed interim financial statements have been reviewed, not audited.

2. Basis of preparation

These condensed interim financial statements for the six months ended 31 December 2019 have been prepared in accordance with International Accounting Standard 34 'Interim financial reporting' ('IAS 34') as adopted by the European Union (the 'EU'). The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 30 June 2019, which have been prepared in accordance with International Financial Reporting Standards ('IFRS' or 'IFRSs') as adopted by the EU.

The Group meets its day-to-day working capital requirements through its bank facilities. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities. After making enquiries and having reassessed the principal risks, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis of accounting in preparing the condensed interim financial statements.

The financial information in the condensed consolidated financial statements has been prepared on a basis consistent with that adopted for the year ended 30 June 2019, apart from the application of IFRS 16.

The preparation of interim consolidated financial statements in compliance with IAS 34 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies. The areas where significant judgements and estimates have been made in preparing the financial statements and their effect are disclosed in the notes to the Group's statutory consolidated financial statements for the year ended 30 June 2019 in note 2 on page 90 and in the notes to these interim condensed consolidated financial statements.

On 1 July 2019, the Group adopted IFRS 16 'Leases' using the modified retrospective approach. Under the specific transitional provisions in the standard, comparative information has not been restated and the adjustments arising from the new standard have been recognised in the opening balance sheet on 1 July 2019. Further details on the change in accounting policies and impact on the financial statements is provided in note 13.

There have been no other accounting standards, amendments and interpretations that are effective for the first time in respect of the Group condensed interim financial statements for the six months ended 31 December 2019 and which have had a material impact on these financial statements. 

3. Segment information

The Group's reportable segments are strategic operating business units that provide different products and service offerings into different market environments. They are managed separately because each operational business requires different expertise to deliver the different product or service offering they provide.

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker during the reporting period. The Chief Operating Decision Maker has been identified as the Executive Directors. There have been no changes to the reported segments during the period.

The Group evaluates performance of the operational segments on the basis of gross profit from operations.

*Adjusted EBITDA is now shown after the adoption of IFRS 16. The Group implemented IFRS 16 'Leases' for the first time in FY20 using the modified retrospective approach. Statutory reported comparatives have not been restated and therefore the statutory results are not comparable to the prior year. The prior period adjusted results have been restated for IFRS 16. 

4. Non-underlying items

Non-underlying items have been reported separately in order to provide the reader of the financial statements with a better understanding of the operating performance of the Group. These items include amortisation of intangible assets acquired through business combinations and acquired products, and one-off costs principally relating to the acquisitions. The associated tax impact is also reported as non-underlying.

a) The acquisition costs in the prior year relate to CSM and iQone comprising legal, corporate finance, due diligence advice and costs for securing 'certain funds' for the CSM acquisition.

b) Restructuring costs have been incurred during the period in respect of the integration of acquired businesses as well as preparations for any potential Brexit impact.

c) Contingent consideration on CSM and iQone is denominated in foreign currency. The revaluation of these liabilities is treated as non-underlying as they relate to one-off items and do not reflect the underlying trading of the Group.

d) The amortisation of intangible assets acquired as part business combinations (namely brand, trademarks and licences, customer relationships, and contracts) and acquired products, is included in non-underlying due to its significance and to provide the reader with a consistent view of the underlying costs of the operating Group.

e) The non-cash unwind of the discount applied to the deferred and contingent consideration on the acquisitions of Proleukin, CSM, and iQone.

f) The tax credit in respect of non-underlying items reflects the tax benefit on the costs incurred. 

5. Net finance expense

6. Income tax

The Group has recognised a tax charge in the income statement based on the current projected full year effective tax rate of 24.2% (2018: 23.8%).

7. Earnings per share

8. Dividends

The final dividend in relation to the year ended 30 June 2019 of 4.75p (2018: 3.84p) per ordinary share was paid on 29 November 2019. This amounted to £6.3m (2018: £5.1m).

An interim dividend of 2.15p (2018: 1.95p) per ordinary share has been approved by the Board. This amounts to £2.9m (2018: £2.6m) and will be paid on 17 April 2020 to all shareholders on the register as at 20 March 2020.

9. Intangible assets

10. Net debt

On 1 July 2019, the Group adopted IFRS 16, 'Leases' which changed the accounting treatment for the Group's lease contracts that were previously accounted for as operating leases under IAS 17. On transition to the new standard, a lease liability of £18.5m was recognised.

At the period end, there were two covenants that applied to the bank facility (calculated on a frozen GAAP basis, therefore excluding the impact of IFRS 16): interest cover of not less than 4.0x and net debt/adjusted EBITDA cover of not more than 3.0x. As at 31 December 2019, interest cover was 12.0x and the net debt/adjusted EBITDA leverage was 2.4x. There were no instances of default, including covenant terms, in either the current or the preceding period.

11. Financial risk management and financial instruments

Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 30 June 2019. There have been no changes in the risk management processes or in any risk management policies since the year end.

Financial instruments

Fair value estimation

Financial instruments are classified as follows: Level 1 instruments are those valued using unadjusted quoted prices in active markets for identical instruments; Level 2 instruments are those valued using techniques based significantly on observable market date; and Level 3 instruments are those valued using information other than observable market data.

Derivative financial instruments at 31 December 2019 and 31 December 2018 comprise forward foreign exchange contracts. These derivatives have been fair valued using forward exchange rates that are quoted in an active market and fall within Level 2 of the fair value hierarchy.

Contingent consideration on acquisitions has been valued using management's latest forecast of the profit of the businesses during the earn out period and falls within Level 3 of the fair value hierarchy.

There are no Level 1 financial instruments at 31 December 2019, and there have been no transfers between valuation levels nor changes in valuation techniques during the period.

12. Share capital

13. Change in accounting policies - IFRS 16: Leases

On 1 July 2019, the Group adopted IFRS 16 'Leases' using the modified retrospective approach. Under the specific transitional provisions in the standard, comparative information has not been restated and the adjustments arising from the new standard have been recognised in the opening balance sheet on 1 July 2019.

The Group leases various offices, warehouses, equipment and vehicles. Rental contracts are typically made for fixed periods of three to ten years but in the case of property, they often have extension options which are normally exercised. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets cannot be used as security for borrowing purposes.

Until the end of the previous financial year, leases of property, plant and equipment were classified as either finance or operating leases. Payments made under operating leases (net of any incentives received from the

lessor) were charged to profit or loss on a straight-line basis over the period of the lease.

From 1 July 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost in the cash flow statement. The finance cost is charged to profit or loss over the lease period (through underlying finance costs) so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17, 'Leases'. These liabilities were measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate as of 30 June 2019 which was 2.75%.

For leases previously classified as finance leases, the carrying amount of the lease asset and lease liability immediately before transition are recognised as the carrying amount of the right-of-use asset and the lease liability at 1 July 2019.

The associated right-of-use assets were measured on a retrospective basis as if the new rules had always been applied.

Due to the differences arising between the lease liabilities and the right-of-use assets on transition, an adjustment of £2.1m has been recognised through retained earnings. As a result of this adjustment, an associated £0.4m deferred tax asset has also been recognised through retained earnings.

In applying IFRS 16 for the first time, the group has used the following practical expedients permitted by the standard:

·; reliance on previous assessments of whether a contract is or contains a lease;

·; reliance on previous assessments of whether leases are onerous;

·; the accounting for operating leases, with a remaining lease term of less than 12 months as at 1 July 2019, as short-term leases;

·; the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application; and

·; the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

The impact of the new standard on the income statement for the 6 months ended 31 December 2019 was an increase in EBITDA of £2.0m (2018: £1.9m) reflecting the removal of the lease charge recognised under IAS 17 through administrative expenses, offset by increased depreciation of £1.6m (2018: £1.6m) on the right-of-use assets, and an increase in finance costs of £0.3m (2018: £0.3m) relating to the unwind of the discount on the lease liabilities.

14. Post balance sheet events

Post period end, the Group's debt facility has been increased from £375m to £430m comprising an unsecured £180m term loan with a single repayment in 2023 and an unsecured revolving credit facility of up to £250m.

Independent review report to Clinigen Group plc

Report on the condensed interim financial statements

We have reviewed Clinigen Group plc's Condensed interim financial statements (the "interim financial statements") in the half-yearly report of Clinigen Group plc for the 6 month period ended 31 December 2019. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the AIM Rules for Companies.

The interim financial statements comprise:

·; the condensed consolidated statement of financial position as at 31 December 2019;

·; the condensed consolidated income statement and condensed consolidated statement of comprehensive income for the period then ended;

·; the condensed consolidated statement of cash flows for the period then ended;

·; the condensed consolidated statement of changes in equity for the period then ended;

·; and the explanatory notes to the interim financial statements.

The interim financial statements included in the half-yearly report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the AIM Rules for Companies.

As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The half-yearly report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements.

Our responsibility is to express a conclusion on the interim financial statements in the half-yearly report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the AIM Rules for Companies and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

East Midlands

25 February 2020